by David Chapman
Staff Writer
Mayor John Peyton announced Tuesday that a pension reform deal has been reached between the City and the Police and Fire Pension Fund that will have long-term savings of $700 million over the next 35 years.
Pension reform has been discussed in the past couple of years by Peyton, City Council members and City officials alike as a major issue in securing the City’s long-term financial sustainability in part through reducing employee-related expenses.
Rising health care and pension costs have crippled budgets across the country, said Peyton.
“Jacksonville, like governments across the country, continues to struggle with balancing the need to meeting rising employee and pension costs while grappling with declining revenue and increasing service demands,” he said.
Such pension reform, which Peyton referred to as “aggressive,” would affect only new hires, not current employees within the system, and are wide-ranging.
Among the numerous changes, reform elements include employee retirement after 25 years of service at any age, up from 20 years; employees becoming eligible for the Deferred Retirement Option Plan at 25 years of service, pending state approval of City funding through the option plan period, up from 20 years of service; employee Cost of Living Adjustments capped at 3 percent beginning 24 months after employment termination, up from three months; and an age limit of 31 for new employees, replacing no age limit.
The guaranteed DROP interest rate of 8.4 percent is also being replaced with a rate linked to earnings assumptions set for funding by an actuary, less a risk premium of .25 percent. The new rate will also not exceed 8 percent.
Combined with reforms negotiated with the unions representing the General Employees Pension Plan, Peyton said a saving of $1 billion would be realized over the 35-year span.
Under the agreement, general employees must reach 60 years of age to earn full benefits, up from 55, and their final average retirement benefit would be based on their highest paid 5 years, up from 3, among other changes.
“This is a great day in the City of Jacksonville,” said Peyton of the deals.
The City presented a pension reform plan to the police and fire pension board, which then created a special committee on pension reform led by Peter Sleiman, board of trustees member.
After months of review, the committee returned a plan back to the City. The agreement was culminated Friday and presented publicly Tuesday.
The fund currently has $1.3 billion in assets, said Sleiman, but economic sustainability was the goal.
“Sustainability was paramount,” said Sleiman. “Everyone got together and realized what’s important.”
Council President Jack Webb, a labor attorney, called the agreement “a hallmark decision.”
“We’re getting through it,” said Webb of key issues affecting economic sustainability.
The agreement will have no short-term budget effects, other than previously negotiated 2 percent pay decreases agreed upon by several unions.
The pension deal will now head to the pension board of trustees for approval at its next meeting May 18 and, if successful, will head to the City Council for approval.
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